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By Howard Schneider and Jason Lange

WASHINGTON (Reuters) - The election of Donald Trump as U.S. president has done nothing to change the Federal Reserve's plans for a rate increase "relatively soon," Fed Chair Janet Yellen said on Thursday in Congressional testimony that included a pledge to serve out her term.

Yellen said the U.S. central bank would change its outlook as necessary as the new administration rolls out plans for perhaps hundreds of billions of dollars in tax cuts and additional government spending. She also suggested the new government keep in mind that the United States is near full employment and inflation may be rising.

"Markets are anticipating ... a fiscal package that involves a net expansionary stance of policy and that in a context of an economy that is operating reasonably close to maximum employment with inflation heading back to 2 percent," Yellen said, suggesting new programs focus on "policies that would improve ... long run growth and productivity."

There had been some uncertainty about how Yellen would interact with a new president who at turns during the campaign spoke favorably of the Fed's low rate policies, and yet also accused the Fed of acting politically to help Democratic nominee Hillary Clinton.

Trump, during his election campaign, had also said he would replace Yellen when her term expires. Asked directly by a member of the Joint Economic Committee on Thursday, Yellen said she planned to serve out her term as chair, which ends in 2018.

While the election has not affected matters yet, they may find themselves at odds if Trump, for example, pursues a roll-back of financial regulations.

On that topic, Yellen cautioned against any effort to "turn back the clock" on the Dodd-Frank financial regulations approved following the 2007 to 2009 financial crisis because that could make a repeat more likely.

So far she said there was little risk the Fed had fallen behind the curve and would lose control of inflation.

"The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up," Yellen said. "The risk of falling behind the curve in the near future appears limited."

However the chair also acknowledged the uncertainty that may lie ahead as President-elect Trump rolls out his program.

"When there is greater clarity about the economic policies that might be put into effect the (Federal Open Market Committee) will have to factor those assessments of their impact on employment and inflation and perhaps adjust our outlook," Yellen said.

U.S. Treasury yields rose on Thursday after data suggested the U.S. labor market is tightening and inflation is beginning to gain traction, which prompted investors to sell government debt.

"Yellen is saying it's full steam ahead for a Fed hike in December," said Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management. "The big question is what happens after that. Trump's election has given investors plenty of reason to question the lower for longer mantra."

The U.S. dollar rose to a 13-1/2-year high against a basket of currencies on Thursday as the bond market resumed its sell-off.

CENTRAL BANK INDEPENDENCE PRODUCES BETTER OUTCOMES

Yellen also repeated the consensus among central bankers that remaining clear of politics was central to their job, a message the Fed has repeated to Congressional Republicans who have argued for closer oversight of monetary policy.

"There is clear evidence of better outcomes in countries where central banks can take the long view," Yellen said. "Sometimes central banks need to do things that are not immediately popular for the health of the economy."

The Fed may face pressure, given Republican control of the White House and both chambers of Congress, to hew to a more mathematical formula for setting rates, something central bankers in general argue should not fully displace their judgment.

Yellen spoke on a day when economic data showed continuing economic momentum, with consumer prices posting their largest gain in six months, new home construction soaring and new claims for unemployment benefits near 43-year lows.

The data underscored Yellen's generally upbeat assessment of where the country stands. There remains "room to run" in the U.S. recovery, Yellen said, and rate increases can likely proceed on a gradual basis. But she noted that wages were rising, growth had accelerated over the second half of the year, and the world economy was on a firmer footing than it had been in recent months when uncertainty about China and Europe had caused the Fed to postpone its rate increase plans.